Senior executives at Herbalife (HLF) are telling investors it’s all but certain the Federal Trade Commission will not shut down the company at the conclusion of its wide-ranging investigation, though they expect some form of disciplinary action, FOX Business Network has learned.
Since March, the FTC has been investigating whether the nutritional supplement outfit operated as an illegal “pyramid scheme,” meaning its sales were largely derived from attracting people to distribute its product, rather than actual sales to customers. The FTC action follows claims by short seller Bill Ackman, who says the company’s business model violates a host of federal and state laws, and that Herbalife should be shut down by the government.
Despite the increased attention on the company, Herbalife executives have been speaking to attorneys, academics and former FTC officials, and have come to the conclusion that the chances of a shutdown are remote, according to people with direct knowledge of the matter. In recent weeks, senior executives have been making the rounds with Herbalife’s top investors and explaining while the FTC’s investigation hasn’t concluded, they feel confident the company will avoid a corporate death sentence.
An Herbalife spokeswoman declined to comment on the matter, but would not deny such conversations